BlackRock shifts $185B model portfolios deeper into US stocks and AI

BlackRock is steering $185 billion worth of model portfolios deeper into US stocks and artificial intelligence. The decision came this week as the asset manager adjusted its entire model suite, increasing its equity allocation and dumping exposure to international developed markets.

The firm now sits 2% overweight on stocks, after money moved between several of its biggest exchange-traded funds.

This wasn’t a slow shuffle. Billions flowed across multiple ETFs on Tuesday as BlackRock executed the realignment. The iShares S&P 100 ETF (OEF) alone brought in $3.4 billion, the largest single-day haul in its history.

The iShares Core S&P 500 ETF (IVV) collected $2.3 billion, while the iShares US Equity Factor Rotation Active ETF (DYNF) added nearly $2 billion.

The rebalancing triggered swift inflows and outflows that realigned investor exposure on the back of performance data and macroeconomic outlooks.

BlackRock raises equities on strong US earnings

The model updates come as BlackRock backs the rally in American stocks, fueled by strong earnings and optimism around rate cuts. In an investment letter obtained by Bloomberg, the firm said US companies have delivered 11% earnings growth since the third quarter of 2024.

Meanwhile, earnings across other developed markets barely touched 2%. That gap helped push the decision to drop international holdings in favor of American ones.

Michael Gates, lead portfolio manager for BlackRock’s Target Allocation ETF model portfolio suite, said the US market is the only one showing consistency in sales growth, profit delivery, and revisions in analyst forecasts.

“The US equity market continues to stand alone in terms of earnings delivery, sales growth and sustainable trends in analyst estimates and revisions,” Michael wrote. He added that non-US developed markets lagged far behind, especially when it came to sales.

This week’s changes reflect that position. The move was made ahead of the Federal Reserve’s expected interest rate cuts, which many expect to begin on Wednesday.

The S&P 500 is already sitting at all-time highs, with artificial intelligence spending driving momentum and investors preparing for a cheaper money environment.

BlackRock’s reweighting puts its models in line with those expectations, using updated data to pull money out of low-performing regions and place it where growth looks more sustainable.

Model portfolios like these are built for financial advisers who want pre-packaged asset allocations. When BlackRock updates its allocations, it shakes up flows across multiple funds. The models have grown fast. Earlier this year, they managed $150 billion. Now that number sits at $185 billion.

BlackRock’s model team is also “leaning in” to the AI build-out, and is shifting from offering exposure to its broad-based US tech ETF to an AI-focused fund, according to the commentary. Nearly $1.4 billion flowed into the iShares AI Innovation and Tech Active ETF (BAI) on Tuesday, while the iShares US Technology ETF (IYW) lost $2.7 billion.

“We view AI as both a defensive hedge and a growth catalyst,” Michael wrote.

Every ETF involved in the shift reflected a part of the broader decision. The iShares Core S&P 500 ETF took in over $2 billion as money moved to large caps. Factor rotation gained almost $2 billion too, showing that BlackRock isn’t just buying the index, it’s actively betting on sector changes within US stocks.

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